NEW YORK — The U.S. stock market experienced a turbulent day on Monday as President Donald Trump threatened to increase tariffs, causing significant fluctuations in stock indices. The S&P 500 index ended with a slight decline of 0.2% after a day filled with dramatic swings. Financial markets remained uncertain about Trump’s ultimate objectives in his trade conflict. If his goal is to persuade other nations to agree to new trade deals, he may ease tariffs to prevent a potential recession. However, if his aim is a long-term economic transformation by maintaining tariffs, stock prices might continue to decline.
The Dow Jones Industrial Average saw a fall of 349 points, equivalent to 0.9%, while the Nasdaq composite showed a slight rise of 0.1%. Initially, all three indexes began the day sharply down, with the Dow plummeting as much as 1,700 points, following more severe losses globally. However, the indices rebounded dramatically, with the Dow almost gaining 900 points by late morning. The S&P 500, starting with a loss of 4.7%, jumped to a rise of 3.4%, a growth rate unmatched in years.
This sudden uptick was triggered by a rumor that Trump might consider halting his tariffs for 90 days. However, a White House account soon labeled this information as “fake news,” illustrating the degree of investor anticipation for any indication of Trump easing tariffs. Subsequently, as stocks somewhat rebounded, Trump announced he might increase tariffs further on China. This came after China’s retaliation with its tariffs on U.S. goods last week.
Trump’s stance is a surprising turn for Wall Street, as many investors had expected that he, who often touted market highs under his administration, would reconsider his policies if they negatively impacted the Dow. During a conversation on Air Force One, Trump appeared unfazed by market declines, stating that sometimes “you have to take medicine to fix something.”
His rationale for tariffs includes encouraging manufacturing job return to the U.S., a strategy likely to take years. On the same day, global markets remained unsure, buoyed by lingering hope for possible negotiations. Nate Thooft, a senior portfolio manager at Manulife Investment Management, noted that in such volatile conditions, markets tend to fluctuate not only daily but hourly.
The only certainty on Monday was the global financial strain following Trump’s latest tariff announcement, dubbed “Liberation Day.” Stocks in Hong Kong dived 13.2% for their steepest drop since 1997. U.S. crude oil prices fell below $60 a barrel for the first time since 2021 over fears that a trade-dampened global economy would require less fuel. Bitcoin also dropped below $79,000 from a high above $100,000 set earlier in the year.
Trump’s tariffs represent a challenge to globalization, which has reshaped the global economy by reducing product prices in the U.S. but also outsourcing jobs. This creates additional pressure on the Federal Reserve. Investors have grown accustomed to the Fed cutting interest rates during downturns as a remedial measure. However, with inflation higher than desired, the Fed’s flexibility to act might be constrained. Lower interest rates can boost the economy but may also elevate inflation.
JPMorgan CEO Jamie Dimon remarked on Monday that recent tariffs increase the likelihood of inflation, leading some to anticipate a greater chance of a recession. However, whether these tariffs will induce a recession remains uncertain, though they will slow growth.
In the bond market, Treasury yields managed to recover from previous sharp declines. This movement might partly result from adjusted expectations of the Fed’s interest rate cuts, with analysts hinting that foreign investors could be scaling back their U.S. investments. The yield on the 10-year Treasury leaped to 4.20% from a previous 4.01%.
Earlier, the S&P 500 briefly fell over 20% from its record set less than two months prior. A day closing below this threshold signifies a “bear market,” denoting a downturn surpassing an ordinary 10% drop. The index, a cornerstone for many investors’ retirement accounts, suffered its worst week since the global economic strain caused by COVID-19 in March 2020.
In summary, Monday saw the S&P 500 drop by 11.83 points to 5,062.25, the Dow Jones Industrial Average lose 349.26 to 37,965.60, and the Nasdaq composite gain 15.48 to reach 15,603.26.